New FLSA Amendments Set to Raise Overtime Pay Protection Thresholds for Salaried Workers

On April 23, 2024, the Department of Labor issued a final ruling amending the "white-collar" exemptions to the overtime compensation requirements of the Fair Labor Standards Act (FLSA).

This significant development followed a Notice of Proposed Rulemaking (NPRM) announced by the DOL on August 30, 2023, which proposed to extend overtime protections for low-paid salaried workers.

Today, we'll explore the details of the latest ruling, highlighting its key provisions and discussing what these changes mean for business owners and managers. Join us below.

Understanding Overtime Pay Protection Laws

The Fair Labor Standards Act (FLSA) provides overtime pay protections for U.S. workers, ensuring that employees who work more than 40 hours a week receive at least 1.5 times their regular pay for those additional hours.

While almost all hourly staff automatically qualify for overtime pay, the situation differs for salaried employees in executive, administrative, and professional roles.

Under certain conditions under current law, some salaried personnel may be exempt from the overtime pay requirement based on factors including their weekly salary.

Under the current law, there are two relevant categories of salaried workers who might be exempt from overtime under the FLSA:

• Highly Compensated Employees (HCEs): Employees who are considered highly compensated may qualify for an overtime exemption if they perform office or non-manual work and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee. Currently, an employee qualifies as an HCE if they earn a total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis.
• Standard Duties Test for Executive, Administrative, and Professional Employees: This category includes employees who may not meet the high compensation threshold of the HCE exemption but fulfill the duties test for executive, administrative, or professional roles. To qualify for an exemption in this category, employees must meet specific duties criteria detailed by the FLSA and be paid at least $684 per week on a salary basis.

The Final Ruling and its Provisions

The Department of Labor's final rule has revised the salary thresholds for overtime pay protection, expanding eligibility for more salaried employees. Below are the critical updates:

For highly compensated employees (HCEs), the changes are:

• $132,964 starting July 1, 2024
• $151,164 beginning January 1, 2025
• Additional adjustments every three years, starting July 1, 2027

For standard salaried workers in executive, administrative, and professional roles, the current weekly threshold of $684 will increase as follows:

• $844 per week ($43,888 annually) starting July 1, 2024
• $1,128 per week ($58,656 annually) starting January 1, 2025
• Further increases will be implemented annually beginning July 1, 2027

These amendments will take effect on July 1, 2024.

What This Means for Business Owners and Managers

Essentially, the new rule means that more employees will qualify for overtime. As someone at the helm of a business, here are the steps you should take to prepare for this imminent change:

• Review Employee Classifications - The first course of action should be to review your current staff roles and determine whether workers currently exempt will remain so under the new law.
• Adjust Salaries of Reclassified Employees - If you find that certain employees are newly eligible for overtime, you might consider adjusting their salaries to maintain their exempt status. However, if this route isn’t feasible, you may need to revise their employment contracts. This would involve reclassifying them from exempt to non-exempt status, thus making them eligible for overtime pay.

Conclusion

We hope today's publication on the DOL’s amendment to the FLSA overtime pay protection laws has provided valuable insights on how you can adapt your business operations in anticipation of this regulatory change, set to take effect on July 1, 2024.

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

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